R U concerned that your "baddassity" might means-test away your SS & Medicare?

[DreamFIRE]

It's not a means test by most (all?) common definitions of the term.

Here's an AARP paper suggesting that there is an option to begin means-testing Social Security.

"Option: Begin Means-Testing Social Security Benefits"

https://www.aarp.org/content/dam/aarp/research/public_policy_institute/econ_sec/2012/option-means-test-social-security-benefits-AARP-ppi-econ-sec.pdf

Yes, although I hadn't seen that document before, that is the income based means testing I had mentioned in this thread and recommended in more detail in the "SS isn't Bankrupt" thread as opposed to the current earnings tested formula.

From the aarp document:

One option to help close Social Security’s funding gap is to “means test.” Means testing would reduce benefits for higher-income recipients and could even eliminate benefits altogether for the highest-income households.  Unlike the reform option to reduce benefits for higher earners, which uses a measure of career average earnings to reduce benefits, means testing would reduce benefits based on the full range of current income.

[Mr. Green]

Tomato. Tomahto. You can't do both. Plus a plain asset test is easy to beat with an irrevocable trust. I'm sure there are other ways too. You can't beat testing someone's means over 35 years of their working life.

Huh? You literally say in your post that you can easily beat a means test then say you can't beat a means test. You are confusing me.

Means testing is asset testing. Means testing is not income or earnings testing.

"Means" testing is simply testing someone's means to pay. Taxing you for your entire working career and decreasing the rate your benefit increases as your cumulative earnings goes up is already taking your means into account via lifetime earnings. Earn more, get a smaller % of benefits compared to your earnings. You can't beat that means test.

A point-in-time means test can be defeated by legal methods of not "owning" your assets, like an irrevocable trust. You could give money to family members and have them gift it back to you yearly. Too many holes.

[Mr. Green]

And that AARP paper is specifically talking about means testing non-Social Security income once benefits would have begun. Still not the same as a cumulative asset test. The income test already happens somewhat by taxing SS benefits above a certain amount.

The paper also talks about only affecting about 9% of all retirees with the means test proposed. It proposes $110,000 in non-SS income as the threshold for a couple at which benefifs would start dropping. People that have figured out how to live comfortably on $40,000-60,000 wouldn't be affected. I don't see anything to worry about, new means testing proposal or not.

[DreamFIRE]

It proposes $110,000 in non-SS income as the threshold for a couple at which benefits would start dropping. People that have figured out how to live comfortably on $40,000-60,000 wouldn't be affected.

Yeah, that's too high of "other" retirement income.  A few weeks back, I was suggesting $50,000 in "household" "other" retirement income as the roll-off point for reducing SS benefits, but maybe it should be even less, depending on how quickly it gets reduced to $0.

[EnjoyIt]

Can someone please explain why the taxation of SS benefits for higher income people not a form of means testing?  Basically if we compare two people with equal 35 years of contributions to SS.  Person A did not save any money for retirement while person B saved up every dollar they could via a 401k and a taxable account.  Despite both people having equal contributions into SS, person B would receive a smaller benefit because they have an alternate sources of income and their social benefits will get taxed while person A will be no taxes.

[DreamFIRE]

Can someone please explain why the taxation of SS benefits for higher income people not a form of means testing?  Basically if we compare two people with equal 35 years of contributions to SS.  Person A did not save any money for retirement while person B saved up every dollar they could via a 401k and a taxable account. Despite both people having equal contributions into SS, person B would receive a smaller benefit because they have an alternate sources of income and their social benefits will get taxed while person A will be no taxes.

No, they would both receive the same benefit at full retirement age.  Person B would NOT receive a smaller benefit.

Taxes are traditionally higher with higher income, but that's not considered means testing by any metric I've heard of.

Also see:
https://forum.mrmoneymustache.com/welcome-to-the-forum/are-you-concerned-that-your-'baddassity'-might-means-test-away-your-ss-medicar/msg2069783/#msg2069783

[swampwiz]

Can someone please explain why the taxation of SS benefits for higher income people not a form of means testing?  Basically if we compare two people with equal 35 years of contributions to SS.  Person A did not save any money for retirement while person B saved up every dollar they could via a 401k and a taxable account.  Despite both people having equal contributions into SS, person B would receive a smaller benefit because they have an alternate sources of income and their social benefits will get taxed while person A will be no taxes.

You are correct; it is a means-test in an implicit way.  My original proposition included any type of loss of net benny because of high assets/income.  The idea is that the Fool would live high and not save, while the Moustacher would scrimp & save and be penalized for it.

[BudgetSlasher]

I was reading this:

https://finance.yahoo.com/news/medicare-crisis-almost-185009238.html

The article says that means-testing will have to put in place.  So what this seems to mean is that folks who had splurged during their earning years will get the full benefit, but the "badasses" who scrimped & saved and have a nice nest egg will get the benefit reduced away.  As for myself, I had a feeling this would eventually come out, so I didn't bother building a big enough nest egg (of course if my stock market investments soar, I won't be sad!) just so I could be assured of getting the complete benefit.

What do you mean by "big enough"? Do you mean that you did not save enough for retirement period, that you did not save enough for retirement without SS, or something else?

The potential to reform SS is something I would keep an eye on. But, to make a decision today based on pure speculation on what might happen tomorrow? No.

I would wager that when the reform SS, it will be like most changes. Phased in, it might be sudden, but like the age changes the larger the change the further away from retirement the impacted individuals.

And I certainly would not under save today to get the full future benefit of SS if SS is reformed in a specific way instead of any one of the other potential options.

[Kyle Schuant]

I had a feeling this would eventually come out, so I didn't bother building a big enough nest egg

Not building savings because you're worried you'll miss out on government benefits is like smoking and drinking a lot because you're worried you'll miss out on medical care.

[Retire-Canada]

The sooner you can stop worrying about other people and just focus on your own life the better your life will be. Things are never fair in life sometimes you'll come out on top....sometimes you won't.

[DreamFIRE]

Can someone please explain why the taxation of SS benefits for higher income people not a form of means testing?  Basically if we compare two people with equal 35 years of contributions to SS.  Person A did not save any money for retirement while person B saved up every dollar they could via a 401k and a taxable account.  Despite both people having equal contributions into SS, person B would receive a smaller benefit because they have an alternate sources of income and their social benefits will get taxed while person A will be no taxes.

The idea is that the Fool would live high and not save, while the Moustacher would scrimp & save and be penalized for it.

You might also be interested in this thread about Roth accounts getting taxed:

https://forum.mrmoneymustache.com/welcome-to-the-forum/how-pissed-would-you-be-if-roths-got-taxed/

[SwordGuy]

There is a real possibility that the greed in one party will cut SS and Medicare to the bone.

And a real possibility from the other party that anyone with money will be considered fair game.

I'm accumulating assets in FIRE to help mitigate whatever goes wrong with our FIRE plans.

[EnjoyIt]

I expect to get some form of SS in the future but since retirement age and collection are so far apart it is not calculated into my retirement plans. 

[Kyle Schuant]

There is a real possibility that the greed in one party will cut SS and Medicare to the bone.

And a real possibility from the other party that anyone with money will be considered fair game.

More importantly, there's a possibility that there just may not be money to pay for pensions, social welfare and Medicare. I mean... a one trillion deficit? At some point either the money must be paid back or people stop lending to the US govt. Both would mean cutting spending.

[trollwithamustache]

I'm gonna take all this jibber jabber to mean OP is correct to be concerned, but there are a ton of good reasons not to think its going to happen. as in AARP members vote.

:)

[Syonyk]

No. I expect no SS at all by the time I am of age, plan for zero, and will treat anything I get as a bonus.